Almost all automotive electronic components contain one or more components produced by Nexperia. The battle for control has lasted for more than a month, making keywords such as "supply interruption" and "supply shortage" once again become the focus of the automotive industry's third quarter report after the end of the pandemic.
Nexperia was formerly the "standard products" department of NXP Semiconductors. It operated independently in 2017 and was later acquired by China Wingtech Technology. Nexperia occupies an important market share in the field of automotive basic chips. At the same time, it actively deploys emerging SiC power devices and provides specific products such as analog interface chips.
Last year, Nexperia had the world's highest market share in the field of small-signal discrete semiconductors (transistors and diodes) with a share of about 20%. Its customers include car companies and their upstream multi-tier suppliers, amplifying the risk of supply chain disruption.
The German and Japanese Automobile Manufacturers Associations have issued early warnings. At the end of October, Honda's Celaya plant in Mexico was shut down due to a shortage of chips. Nissan announced at its earnings meeting this week that its local Oppama and Kyushu plants will reduce production for one week starting from November 10 due to a shortage of chips.
Last week, it was revealed that Volkswagen and Bosch had suspended production on some of their production lines. The Volkswagen Group said it was evaluating alternative procurement options to minimize the possible impact on the supply chain. Porsche has also set up a special working group to respond. Lidar company Valeo said it has found and validated alternative chips for more than 95% of its components, with new suppliers including Infineon, ON Semiconductor and STMicroelectronics.
Some other more junior products have also begun to affect the production of car companies. According to a survey by investment bank Jefferies, the spot inventory of MOSFETs and diodes has tightened significantly, and the delivery cycle of automotive-grade products has been extended to more than 12 weeks. Automakers and suppliers are seeking alternative products.
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However, this round of supply chain fluctuations is very different from the overall core shortage during the pandemic:
Many of Nexperia's products are relatively easy to replace, and some standard components can be selected for second supply and verified in about 1 to 2 months; the electric vehicle company that ranked second in sales in the world last year has replaced them with domestic products in China;
The supply chain disruption caused by the pandemic is regarded as a "useful crisis", and automakers have learned from experience and have more redundancies, from inventory levels to supplier management;
Caused by non-market factors, the solution can only rely on non-market methods.
French automotive exterior parts supplier Plastic Omnium said, "Currently we still have enough Nexperia product inventory to cover production in the next few weeks... All companies are actively looking for second supplies, and there are indeed viable alternative opportunities on the market... We have experienced some adjustments in the past few years and have long been accustomed to this kind of fluctuation."
Semiconductor company NXP said it has not seen customers replenish inventory for the time being. "Our current discussions with customers are basically focused on how they manage working capital very carefully, so there are no signs of restocking so far."
Some companies also said that most suppliers usually have 2 to 3 weeks of parts inventory, plus about a week of buffer on the transportation and OEM sides. The real risk needs to be continuously assessed.
The Volkswagen Group CFO said at the October 30 performance meeting that this time the supply disruption was caused by political and regulatory decisions, and the solution also depends on communication at the policy and diplomatic levels. "We do currently have production coverage until next week... We look forward to progress in the relevant trade negotiations."
Powertrain company BorgWarner is more cautious in comparison. It has a spot procurement team to ensure supply. It said it will actively intervene as it responds to the core shortage crisis and expects some supply interruptions in the European and Chinese markets. Cockpit-integrated Visteon said if China restricted exports of Nexperia products while also restricting sales within China, it could lead to production shutdowns like the one in 2021.
"We understand that Nexperia is currently applying for an export license, a process that typically takes about 45 working days in the past, although the details are still uncertain. We hold approximately 30 days of inventory for the affected parts." Visteon said at the results meeting. They are actively sourcing and validating compatible parts through agents and distributors to mitigate immediate risk.
After experiencing core shortages in 2021, the automotive industry has generally improved supply chain visibility and inventory redundancy levels. OEMs have learned to establish a more direct communication mechanism with upstream semiconductor suppliers, and some leading automakers have even established secondary safety inventories for key chips.
But this improvement is still limited and relative. Manufacturing a car-grade chip requires strict quality verification that takes two months, even if the design is simple and the manufacturing process is backward. However, the raw materials of a single chip itself have almost no cost, and the wafer factories have mostly been depreciated, and the single output is extremely high, resulting in the paradox that they are extremely complex but extremely cheap.
Car companies can establish redundancy for specific MCUs, power chips or high-computing power chips, and even participate in investment and share financial pressure. But redundancy and visibility cannot completely solve systemic and complex problems - you can't predict which link will go wrong first.